Sri Lanka's central bank held interest rates steady on Thursday, saying the economy is growing below potential, a widely expected decision that comes amid fresh political uncertainty after the ruling coalition government suffered a shock defeat in local elections. Policymaker emphasised the need to support an economy that has been beset by production disruptions due to massive intermittent floods and prolonged drought last year. Demand has also been crimped by earlier rate hikes. Some analysts expect the central bank will cut rates at some point this year to spur growth and investment.
As widely expected, the central bank kept the standing deposit facility rate (SDFR) at 7.25 percent and standing lending facility rate (SLFR) at 8.75 percent. "The Monetary Board also noted that the economy is currently operating at a level below its potential," the central bank said in a statement.
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